Budget offers little to the Pound
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Daily Currency Update
Following the early inflation release from the UK on Wednesday, the UK Spring statement was anticipated from chancellor Rachel Reeves dubbed a risky budget to navigate through, it seems Reeves managed it. Higher borrowing costs had eradicated all of her fiscal ‘headroom’, money left over under the main fiscal rule mandating a current budget surplus by the end of the decade. The Treasury had little choice but to cut spending, without invoking a fatal political backlash, jeopardising the government’s ambition to boost growth, or sending bond yields even higher than they already are. Market reaction has been calm, despite the immediate growth forecast falling 1% as thereafter growth will be seen.Sterling had slipped against both the EUR and USD ahead of the budget, after the latest inflation numbers increased bets of an interest rate cut in May. Since the budget, GBP/USD has touched 1.2925 and GBP/EUR has tested 1.2000 once more.
Key Movers
President Trump on Wednesday announced the imposition of a 25% tariff on all imported automobiles and auto parts not produced within the U.S., effective April 2. Europe’s carmakers exported around 800,000 vehicles to the United States last year, according to official U.S. trade data, about four times the number of cars exported by the U.S. to Europe. This has reinvigorated the trade war concerns among market participants and currency movement will be likely in the build up to 2nd April, being coined by Trump as ‘Liberation day’.GBP/USD is back up at 1.2925 and EUR/USD remains below 1.0800, but has touched 1.0790 in the past few hours.
Expected Ranges
- GBP/USD: 1.2890 - 1.2960 ▲
- GBP/EUR: 1.1950 - 1.2010 ▲
- GBP/AUD: 2.0380 - 2.0590 ▲
- EUR/USD: 1.0730 - 1.0810 ▲